Automatic Data Processing, Inc., also known as ADPยฎ, is a leading global technology company providing human capital management (HCM) solutions. With over 1.1 million clients, ADP is considered a leading provider of HR services such as talent, time management, benefits and payroll.
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 1997 Commission File Number 1-5397 ------------------ -------- Automatic Data Processing, Inc - - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter ) Delaware 22-1467904 - - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) One ADP Boulevard, Roseland, New Jersey 07068 - - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, Including Area Code (201) 994-5000 No change - - -------------------------------------------------------------------------------- Former name, former address & former fiscal year, if changed since last report. Indicate by check mark whether the Registrant (1) has filed all annual, quarterly and other reports required to be filed with the commission and (2) has been subject to the filing requirements for at least the past 90 days. X Yes No - - ---------------------------------- -------------------------------- As of May 2, 1997, there were 292,832,377 shares outstanding.
Form 10Q Part I. Financial Information STATEMENTS OF CONSOLIDATED EARNINGS ----------------------------------- (In thousands, except per share amounts) Three Months Ended Nine Months Ended March 31, March 31, ---------------------- ---------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Revenue $1,126,284 $1,031,864 $3,032,589 $2,598,681 ---------- ---------- ---------- ---------- Operating expenses 440,329 428,360 1,249,684 1,087,828 General, administrative and selling expenses 308,063 276,730 830,563 702,095 Depreciation and amortization 59,163 55,298 167,515 148,386 Systems development and 74,849 63,762 213,977 176,808 programming costs Interest expense 7,250 7,804 21,410 22,254 ---------- ---------- ---------- ---------- 889,654 831,954 2,483,149 2,137,371 ---------- ---------- ---------- ---------- EARNINGS BEFORE INCOME TAXES 236,630 199,910 549,440 461,310 Provision for income taxes 71,700 56,010 163,650 126,610 ---------- ---------- ---------- ---------- NET EARNINGS $ 164,930 $ 143,900 $ 385,790 $ 334,700 ========== ========== ========== ========== EARNINGS PER SHARE $ .56 $ .49 $ 1.33 $ 1.16 ========== ========== ========== ========== Dividends per share $ .115 $ .10 $ .33 $ .2875 ========== ========== ========== ========== See notes to consolidated statements.
Form 10Q CONSOLIDATED BALANCE SHEETS --------------------------- (IN THOUSANDS) March 31, June 30, Assets 1997 1996 - - ------ ---------- ---------- Cash and cash equivalents $ 537,817 $ 314,416 Short-term marketable securities 445,992 321,743 Accounts receivable 632,300 507,198 Other current assets 233,219 310,926 ---------- ---------- Total current assets 1,849,328 1,454,283 ---------- ---------- Long-term marketable securities 395,083 462,461 ---------- ---------- Long-term receivables 178,378 188,184 ---------- ---------- Land and buildings 343,085 322,975 Data processing equipment 639,715 578,935 Furniture, leaseholds and other 359,266 330,610 ---------- ---------- 1,342,066 1,232,520 Less accumulated depreciation 841,311 764,254 ---------- ---------- 500,755 468,266 ---------- ---------- Other assets 25,621 19,597 ---------- ---------- Intangibles 1,334,160 1,247,094 ---------- ---------- $4,283,325 $3,839,885 ========== ========== Liabilities and Shareholders' Equity Notes payable $ 126,626 $ 90,746 Accounts payable 96,986 96,351 Accrued expenses & other current liabilities 704,840 590,355 Income taxes 65,813 52,954 Current portion of long-term debt 1,093 5,207 ---------- ---------- Total current liabilities 995,358 835,613 ---------- ---------- Long-term debt 402,672 403,743 ---------- ---------- Other liabilities 87,803 78,508 ---------- ---------- Deferred income taxes 107,815 112,880 ---------- ---------- Deferred revenue 105,826 93,795 ---------- ---------- Shareholders' equity: Common stock 31,429 31,428 Capital in excess of par value 402,527 406,200 Retained earnings 2,828,111 2,537,952 Treasury stock (678,216) (660,234) ---------- ---------- 2,583,851 2,315,346 ---------- ---------- $4,283,325 $3,839,885 ========== ========== See notes to consolidated statements.
Form 10Q CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS ----------------------------------------------- (IN THOUSANDS) Nine Months Ended March 31, 1997 1996 ------ ------- Cash Flows From Operating Activities: Net earnings $ 385,790 $ 334,700 Expenses not requiring outlay of cash 203,638 158,300 Changes in operating net assets 1,970 8,060 --------- --------- Net cash flows from operating activities 587,458 501,060 --------- --------- Cash Flows From Investing Activities: Purchase of marketable securities (832,442) (918,839) Proceeds from sale of marketable securities 773,256 1,031,265 Capital expenditures (111,799) (115,844) Other changes to property, plant and equipment 6,076 6,804 Additions to intangibles (40,961) (14,040) Acquisitions of businesses (92,238) (466,105) --------- --------- Net cash flows from investing activities (298,108) (476,759) --------- --------- Cash Flows From Financing Activities: Proceeds from issuance of notes 45,802 92,378 Repayments of long-term debt (52,426) (11,769) Proceeds from issuance of common stock 69,323 107,952 Repurchases of common stock (107,990) (55,097) Dividends paid (62,438) (83,181) Other 41,780 (15,360) --------- --------- Net cash flows from financing activities (65,949) 34,923 --------- --------- Net change in cash and cash equivalents 223,401 59,224 Cash and cash equivalents, at beginning of period 314,416 313,612 Cash and cash equivalents, at end of period $ 537,817 $ 372,836 ========= ========= See notes to consolidated statements.
Form 10Q NOTES TO CONSOLIDATED STATEMENTS -------------------------------- The information furnished herein reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. All adjustments are of a normal recurring nature. These statements should be read in conjunction with the annual financial statements and related notes of the Company for the year ended June 30, 1996. Note A - The results of operations for the nine months ended March 31, 1997 may not be indicative of the results to be expected for the year ending June 30, 1997. Note B - Earnings per share are based on a weighted average number of shares outstanding, which for the quarters ended March 31, 1997 and 1996 were 292,624,000 and 291,311,000 respectively. The weighted average number of shares for the nine months ended March 31, 1997 and 1996 were 290,504,000 and 289,020,000 respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS ------------------------------------ OPERATING RESULTS Revenue and earnings again reached record levels during the quarter ended March 31, 1997. Revenue and revenue growth by ADP's major business units are shown below: Revenue ---------------------------------- 3 Months Ended 9 Months Ended March 31, March 31, 1997 1996 1997 1996 ------ ------ ------ ------ ($ in millions) Employer Services (a) $ 667 $ 575 $1708 $1418 Brokerage Services 226 202 614 539 Dealer Services 164 145 479 403 Other (a) 69 110 232 239 ------ ------ ------ ------ $1126 $1032 $3033 $2599 ====== ====== ====== ====== Revenue Growth ----------------------------------- 3 Months Ended 9 Months Ended March 31, March 31, 1997 1996 1997 1996 ------ ------ ------ ------ Employer Services (a) 16% 22% 20% 17% Brokerage Services 12 19 14 21 Dealer Services 13 29 19 28 Other (a) (37) 150 (3) 91 ------ ------ ------ ------ 9% 29% 17% 24% ====== ====== ====== ====== (a) reclassified Revenue exceeded $1.1 billion in the quarter ended March 31, 1997, an increase of 12% before factoring in a non-recurring 3% reduction in revenue arising from the recent disposition of GSI's facilities management business. Revenue growth in the Company's three largest businesses, Employer, Brokerage and Dealer Services, was strong at 16%, 12%, and 13%, respectively. Each includes some acquisitions. The primary components of "Other revenue" are claims services, services for wholesalers, the non-employer services businesses of GSI, interest income and foreign exchange differences. In addition, "Other revenue" has been reduced to adjust for the difference between actual interest income earned on invested tax filing funds and income credited to Employer Services at a standard rate. In prior years, this standard rate was 7.8%. In fiscal '97 the standard rate was changed to 6.0% and, accordingly, the previously reported balances for Employer Services and "Other revenue" have been reclassified. Pretax earnings for the quarter increased 18% from last year. As expected, overall corporate margins improved compared to the prior year's quarter as we passed the anniversary date of several of last year's acquisitions. Systems development and programming investments increased to accelerate automation, migrate to new computing technologies, and develop new products.
Net earnings for the quarter, after a higher effective tax rate, increased 15% to $165 million. The effective tax rate of 30.3% increased from 28.0% in the comparable quarter last year, primarily because of the impact of non-deductible intangibles arising from the GSI acquisition and an increased mix of taxable vs. non-taxable investments. Earnings per share grew 14% to $.56 from $.49 last year. For the full year, we continue to expect revenue and earnings per share growth of approximately 15%. FINANCIAL CONDITION The Company's financial condition and balance sheet remain exceptionally strong, and operations continue to generate a strong cash flow. At March 31, 1997, the Company had cash and marketable securities of approximately $1.4 billion. Shareholders' equity was approximately $2.6 billion and the ratio of long-term debt to equity was 16%. Capital expenditures for fiscal 1997 are expected to approximate $200 million, compared to $168 million in fiscal 1996. During the first nine months of fiscal '97, ADP purchased about 2.7 million shares of common stock for treasury at an average price of about $40. The Company has remaining Board authorization to purchase up to 4.9 million additional shares to fund equity related employee benefit plans. PART II. OTHER INFORMATION Except as noted below, all other items are inapplicable or would result in negative responses and, therefore, have been omitted. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Number Exhibit ------ ------- 3.2 By-laws, as amended and restated on March 24, 1997
Form 10Q SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AUTOMATIC DATA PROCESSING, INC. ------------------------------- (Registrant) Date: May 9, 1997 /s/ Richard J. Haviland ----------------------------- Richard J. Haviland Vice President, Finance (Principal Financial Officer) ----------------------------- (Title)